In the Indian e-commerce industry, the visible fight is the one for getting the maximum customers and the most money out of their wallets. But the not-so-visible battle to acquire and retain the best merchants is just as fierce. It is common sense after all—the marketplace whose sellers offer the best products at the most attractive prices and provide excellent service will easily attract customers. No wonder then that Flipkart announced cuts across fixed fees, collection fees, and shipping fees a little over a month ago. Now the company claims that it is not only the marketplace costing a seller the least money to sell a product but also that over 60 percent of the top-performing sellers have passed on these savings to customers in the form of lower prices.
"Sellers have seen a 20–25 percent increase in sales after they reduced prices," says Nishant Gupta, Director –Marketplace at Flipkart. He adds that Flipkart was able to reduce the fees as it saw increased cost efficiency by virtue of cutting down on leakages and tightening processes.
The fee cuts vary according to the selling price, order value, and weight. For instance, the fixed fee for items priced less than Rs 500 was reduced from Rs 15 to Rs 10. Collection fee was reduced by 40 percent for all cash-on-delivery orders. It is mostly sellers in categories like mobile accessories, footwear, home furnishing, and apparel who have benefited the most from the fee change.
Nishant says the rate cuts are just the latest among a slew of measures the Bengaluru-headquartered company, which recently announced a fund raise of $1.4 billion, has introduced to keep its sellers happy. The company introduced a tier system, where sellers are grouped in Gold, Silver, and Bronze categories according to performance and sellers can see where they lag and what they need to do to reach a higher tier. The company has also been working to reduce the time taken to resolve seller problems and has introduced priority support for the Gold tier. Flipkart also offers what it calls 'smart fulfilment'. Here a seller keeps inventory aside for Flipkart in his warehouse and the e-commerce company provides inventory management technology and deeper integration to ensure reliability and fewer breaches. The company has also licensed its private label brand Flipkart Smart Buy to their top sellers in categories like bed sheets and tempered glass. The sellers manufacture these products according to Flipkart's specifications.
These measures and announcements come at a time when Flipkart is engaged in a pitched battle with Amazon across multiple fronts, from price to perception. Many e-commerce insiders see Amazon as having got the better of the India-born Flipkart in areas like customer service, product range, and innovation. Flipkart spent much of 2016 trying to get its groove back after earlier missteps like its app-focused- and mobile-first approach and many high- profile exits. The success of its Big Billion Day sale in 2016 and the appointment of Kalyan Krishnamurthy as CEO were seen as indicators that the company was getting back to focusing on actual business. The focus on sellers should be seen in this context.
While Amazon's hike in commissions has not gone down well with its merchants, it has said it will step up investments into its seller infrastructure. Flipkart and Amazon competing to keep sellers happy is definitely good news for merchants, especially after reports emerged that struggling Snapdeal has not cleared dues.